Commodities Trade Idea - Sugar High

Commodities Trade Idea - Sugar High

In the commodities space, Sugar has been under pressure year-to-date as well as for the period going back to October 2016. From a high of $23.90 in October 2016, we now trade at $12.30, a decline of 48%.

The technical setup going forward suggests we could be seeing reversal and recovery from the price slump.
How does one take advantage of the potential upward move?

Well, you could access sugar via an ETF called the Teucrium Cane ETF which provides investors unleveraged direct exposure to sugar without the need for a futures account.

Why Sugar?

Rising world population and growth of the middle class increases demand for sugar and sugar products, while decreasing the amount of arable  land for sugarcane and other agricultural crop production.

Developing countries account for 67% of global sugar consumption, and  are expected to be the primary sources of future demand growth,  particularly in Asia. Global consumption continues to expand, averaging 1.93% over the past decade, driven largely by rising incomes, population  growth and shifting dietary patterns.

• In 2017/18 global sugar consumption is projected to remain at a near record high.

• Increasing domestic sugar demand in Brazil, the largest producer of sugarcane, largest exporter of sugarcane-based ethanol, and world’s fifth most populous nation, will affect Brazil’s sugar export capacity.

• Increasing domestic sugar demand in India, the world’s second largest producer of sugarcane and the world’s second most populous nation, is putting stress on India’s sugar export capacity.

• Sugar supplies are unpredictable – subject to changing global weather patterns that may cause flooding, drought and crop failures in major producing regions.

In addition to the above-mentioned factors, the technical setup signals an opportunity to take a buy/long position in anticipation of a bullish price reversal.

These are the motivating factors:

Price reversing off swing support going back to August and September 2015
RSI signaling bullish divergence and moving up from an oversold level
Highest volume over the last two month since the ETF was launched in September 2011

These are the trade levels:
Buy CANE at $7.85 (or better)
Stop-loss: $6.80
Take Profit Target: $9.70 and $11.00 (long term)

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